Colombian lawmakers defy President Gustavo Petro by rejecting $2.24 billion tax reform

Colombia is facing severe fiscal challenges as lawmakers voted against a crucial tax reform proposed by the government of President Gustavo Petro. On December 11, 2024, Congress's economic committees rejected the reform aimed at raising 9.8 trillion pesos (approximately $2.24 billion) to help finance the government's budget for 2025. This rejection follows significant budget cuts of 28.4 trillion pesos made earlier in the year due to lower-than-expected tax income. The government's attempts to amend the scope of the reform had already reduced its initial proposal of 12 trillion pesos, indicating the urgency of their financial situation. The backdrop of this legislative failure is the rejection of a 523 trillion peso budget for 2025, with Congress members citing insufficient resources to support such extensive spending. In response to the fiscal constraints dictated by the Autonomous Fiscal Rule Committee, which imposed a 56.2 trillion peso cut to align with fiscal regulations, President Petro has shown a willingness to enact the budget by decree. However, he paused this action, hoping to secure the new tax reform first, in order to avoid further financial strain on the economy. Petro's administration had enjoyed a majority coalition in Congress during the initial phase of his term, which enabled the passing of previous tax reforms. However, the recent disintegration of this coalition has considerably complicated the process of pushing new legislative measures through Congress. The current environment of political division emphasizes the growing challenges Petro faces as he navigates fiscal demands combined with dwindling legislative support, prompting concerns over the longer-term viability of his economic agenda. Looking ahead, the rejection of this tax reform poses grave implications for Colombia's economic stability. Without additional revenue sources, the government may need to resort to more drastic measures, potentially further cutting public services and investments. The future looks increasingly precarious for President Gustavo Petro, who must now reconsider his strategy as attempts to revive his administration's financial agenda continue to face significant roadblocks.